PHYSICAL INVENTORY IN SAP EWM

1. Overview of Physical Inventory in SAP EWM

Physical inventory in SAP EWM involves a series of steps to count and reconcile stock levels.
This process helps in maintaining accurate inventory records and addressing discrepancies
between system data and actual physical stock.

2. Key Components of Physical Inventory

• Inventory Document: This document is used to record the count of physical stock. It
contains details about the items to be counted, the warehouse, and the counting
area.

• Counting Area: This is a part of the warehouse where the physical count takes place.
It can be a specific zone or location within the warehouse.

• Counting Method: Different counting methods can be used, such as full inventory
counts or cycle counts, where only a portion of the warehouse is counted
periodically.

3. Steps in the Physical Inventory Process

1. Preparation

• Create Inventory Document: This can be done manually or automatically based on

predefined criteria. The document includes information about the items, storage bins,
and counting areas.

• Assign Counting Teams: Assign personnel or teams responsible for performing the
physical counts.

• Generate Counting Instructions: These instructions are provided to the counting

teams and include details on what needs to be counted and where.

2. Counting

• Perform Physical Count: The counting teams physically count the inventory in the
specified areas and record the quantities.

• Enter Count Results: Results are entered into the system, either manually or through
mobile devices.

3. Reconciliation

• Compare Count Results: The counted quantities are compared with the quantities
recorded in the system.
 • Adjust Inventory: Discrepancies between the physical count and system records are
investigated, and adjustments are made as necessary.

4. Post-Counting Activities

• Close Inventory Document: Once all discrepancies have been resolved and
adjustments made, the inventory document is closed.

• Review and Reporting: Generate reports to analyse the inventory count process,
review discrepancies, and assess the accuracy of inventory records.

4. Types of Inventory Documents

• Physical Inventory Document: Used for general physical inventory counts. Can be
generated for a specific warehouse or storage type.

• Cycle Counting Document: Used for cycle counts where inventory is counted
periodically throughout the year rather than a single full count.

5. Integration with Other SAP Modules

• SAP S/4HANA: EWM integrates with SAP S/4HANA for seamless data flow between
warehouse management and other business processes.

• SAP ERP: EWM can also integrate with older SAP ERP systems, allowing for
synchronized inventory management and financial data.

6. Best Practices

• Regular Counts: Conduct regular physical inventory counts or cycle counts to ensure
ongoing accuracy.

• Training: Ensure that staff involved in physical counting are well-trained and
understand the process and tools.

• Technology Utilization: Utilize mobile devices and barcode scanners to improve the
accuracy and efficiency of the counting process.

• Reconciliation Process: Establish a clear process for investigating and resolving

discrepancies between physical counts and system records.

7. Challenges and Considerations

• Accuracy: Ensuring that physical counts are accurate and match the system records
can be challenging, especially in high-turnover environments.

• Discrepancies: Addressing and investigating discrepancies requires a systematic

approach to identify the root cause.

• Data Entry Errors: Manual data entry can lead to errors; therefore, automation and
real-time data capture are beneficial.
CONFIGURATION: -

1. DEFINE PHYSICAL INVENTORY AREA: -

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—physical Inventory Area specific settings—Define physical Inventory Area.

PHYSICAL INVENTORY AREA CONTROL PARAMETERS:

1. Putaway physical Inventory:

PI document generates at the time of first putaway in to a storage bin during fiscal year.

2. Low stock check without Physical Inventory:

We check this Bar, then system will check the minimum value we maintain and if it’s below
minimum value system will propose for PI.

3. Low stock check without physical Inventory:

This Indicator is for alerting low stock check during fiscal year without creating a PI
document.

4. Posting after Count Entry:

This check box is for posting the PI document automatically after count with reference to
assigned tolerance group, if the difference is below tolerance group system posts PI
document automatically.

5. Display Book quantity:

Here system displays the Inventory book qty, when the count results are entered. The display
of the book Inventory qty enables to check the count quantity entered.

6. Display item Object:

Indicates that object information is to be displayed as suggested (default) lines when a count
result is entered for a location-specific (for example, storage- bin-specific) physical inventory.

7. HU complete:

If you set this indicator, a handling unit can be counted as "complete" at the time of count
entry. That is to say, a counter accepts the complete hierarchy of a handling unit without
counting any other HUs it might contain or all the products packed in the handling unit.

8. HU Counting method:

It specifies whether counter want to count collectively the number of handling unit (HU) or
the number of items inside a handling unit

2. PERIODICITY OF STORAGE BIN CHECK: -

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—physical Inventory Area specific settings—Define physical Inventory Area—
Periodicity of storage bin check.

3. ASSIGN PHYSICAL INVENTORY AREA TO ACTIVITY AREA:

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Assign Physical Inventory Area to Activity
Area.

• Here Assign the Activity area to physical Inventory Area.

4. DEFINE NUMBER RANGE FOR PHYSICAL INVENTORY DOCUMENT:

Physical Inventory document number ranges are year specific. If maintain year “9999”, then
no need to maintain during year ending activities.

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Define Number ranges for Physical
Inventory documents.

5. SPECIFY PHYSICAL INVENTORY SPECIFIC SETTINGS IN THE WAREHOUSE:

 • In this area we maintain WH control parameters for each Warehouse.

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Specify physical Inventory specific settings
in the Warehouse.

6. DEFINE TOLERANCE GROUP FOR DIFFERENCE ANALYZER:

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Define Tolerance Group for difference
Analyzer.

7. DEFINE TOLERANCE GROUP FOR POSTING DIFFERENCE:

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Define Tolerance Group for Posting
Difference.

8. DEFINE TOLERANCE GROUP FOR RECOUNTING

PATH: Spro—Img—SCM EWM—EWM—Internal warehouse processes ---physical

Inventory—Warehouse number specific settings—Define Tolerance Group for Re-counting

• Here you define physical inventory tolerance groups for the recount of a physical
inventory document in a warehouse number, and assign value-based and quantity-
based (percentage) tolerance values to these activities.

• If the difference exceeds tolerance limit, system automatically propose to recount.

Result of recounting is to create a new PI document with deleting existing document.

Physical Inventory Execution in SAP:

Step 1: Physical Inventory document creation.

a) To Create the Physical inventory document, navigate to Transaction code

/N/SCWM/PI_CREATE).

b) PI document can be created with reference to either storage bin, material, or activity area.
Provide the material number and then click on the execute key

Select the line item displayed.

Navigate to the “Set Flag” button and select the option set flag, as shown in the screenshot
below.

c) Select the line item and click the “Set Initial status Active” button.
d) Once activated, The PI document is created.

Step2: Count

a) To Count the Physical inventory document, navigate to Transaction code

/N/SCWM/PI_PROCESS).

b) Enter the PI document number created in Step 1 and click the execute key.

c) Select the line item and click the “Count” button.

d) In the dialog box, provide the counter and count date and execute

e) Then, provide the Actual qty in the count items section and save.

Step3: Post

a) Click on the Activate option and save.

PI status changes to POST.

Step4: Difference analyser

a) Since there is a difference in stock, we need to perform the difference analyser.

Navigate to the transaction code /N/SCWM/DIFF_ANALYZER

From the drop-down option, select product, provide the product number, and then execute.

b) Select the displayed line item and then click on the Post+ save option in the line item.

c) Post difference dialog box appears with the message as “Do you really want to clear 1
differences?” Select option “Yes”.

d) The material document will be created.